Japan, U.S. to seek first trade talks under new framework in July

FILE PHOTO : U.S. President Donald Trump meets with Japanese Prime Minister Shinzo Abe at his Mar-a-Lago estate in Palm Beach, Florida U.S. April 17, 2018. REUTERS/Kevin Lamarque/File Photo

TOKYO (Reuters) - Japan's automakers association (JAMA) on Friday criticised moves by the United States to explore raising tariffs on Japanese auto exports, just as the two countries plan trade talks in July that may increase pressure on Tokyo to open up its markets.

Washington last month launched a national security investigation into car and truck imports which could lead to new tariffs on one of Japan's major export products to the United States.

New tariffs on auto imports could raise costs for Japanese automakers doing business in the United States, the world's No. 2 auto market. The probe follows a U.S. decision to slap new tariffs on steel and aluminium imports from Japan and other countries earlier this year.

"The investigation launched by the United States Department of Commerce to determine the effects on national security of imports of automobiles ... will create uncertainty among automobile users in the U.S. and people involved in the motor vehicle industry," Akio Toyoda, chairman of the Japan Automobile Manufacturers Association and president of Toyota Motor Corp <7203.T> said in a statement.

He said that if restrictions were implemented, they would raise vehicle prices and reduce available options, penalising consumers. They could also seriously disrupt the plans of automakers, components makers and dealers, "with potentially adverse impacts on the U.S. economy and jobs".

As trade tensions between the two countries heat up, U.S. President Donald Trump and Japanese Prime Minister Shinzo Abe on Thursday agreed to make preparations to hold trade meetings in July which will be based around a new framework focusing on bilateral trade, Japan's foreign ministry said.

The talks will be led by U.S. Trade Representative Robert Lighthizer and Japan Economy Minister Toshimitsu Motegi.

The United States is a major market for Japan's automakers, which produced 3.8 million vehicles at their U.S. plants in 2017, roughly one-third of the 12 million total units produced in the country each year.

An additional 1.7 million vehicles were exported from Japan last year.

Most of Japan's major automakers operate plants in the United States and top producers Toyota, Nissan Motor Co <7201.T> and Honda Motor Co. <7267.T> locally produce between roughly half and 70 percent of all vehicles sold in the country.

But they also operate plants in Mexico and Canada, exporting a portion of the output from those plants, along with some vehicles made in other countries, to the United States.

Analysts say a new trade framework could put Japan under direct U.S. pressure to enter talks for a bilateral free trade agreement (FTA).

Japan is wary of entering such talks as they would put it under pressure to open up politically-sensitive markets like agriculture, while policymakers fear that Trump's threat to impose tariffs on Japanese cars, could be more damaging to the economy than metal tariffs.

In a sign of Japan's irritation, Finance Minister Taro Aso used unusually harsh language to criticise Trump's trade policy at a Group of Seven finance leaders' gathering last week.